Tribke Enterprises collected the following data from its
financial reports for 20X3:
Stock price $18.37
Inventory balance 300,000
Expenses (excluding OGS) $1,120,000
Shares outstanding 290,000
Average issue price of shares $5.00
Gross margin %
40%
Interest rate 8%
TIE ratio 8
Inventory turnover 12*
Current ratio 1.5
Quick ratio 0.75
Fixed asset turnover 1.5
Complete the following abbreviated financial statements,
and calculate per share ratios indicated.
Income
Statement
Revenue
________
COGS ________
GM
________
Expense ________
EBIT
________
Interest
________
EBT
________
Tax
________
EAT
________
Balance
Sheet
Current Assets ________ Current Liabilities ________
Fixed Assets ________ Long
term dent ________
Equity:
Paid-in
capital* ________
Retained
Earnings ________
Total
Equity ________
Total Assets ________ Total
Liabilities & Equity ________
*Paid in capital = Common stock + pain in Excess
.:.
Answer
is given on next page:
Step 1
– The inventory balance of $300,000 represents the difference between the
Current Ratio and the Quick Ratio. Therefore, $300,000/x = .75, where x equals
Total Current Liabilities. Total Current
Liabilities = $300,000/.75 = $400,000.
Step 2
– Since the Current Ratio is 1.5, x/$400,000 = 1.5, where x equals Total
Current Assets. Total Current Assets =
1.5 x $400,000 = $600,000
Step 3
– Inventory Turnover = Cost of Goods Sold/Inventory, so 12 = x/300,000. Therefore, Cost of Goods Sold is $3,600,000.
Step 4
– If the Gross Margin % is 40%, the Cost of Goods Sold must be 60% of
Revenues. Therefore, Revenues x 60% =
$3,600,000. Revenues = $6,000,000.
Step 5
– Gross Margin = $6,000,000 - $3,600,000 = $2,400,000
Step 6
– Gross Margin minus Operating Expenses = EBIT.
$2,400,000 - $1,120,000 = $1,280,000 = EBIT.
Step 7
– TIE = EBIT/Interest Expense. 8 =
$1,280,000/Interest Expense. Interest
Expense = $160,000
Step 8
– Long Term Debt x Interest Rate = Interest Expense. Therefore, Long Term Debt x 8% =
$160,000. $160,000/.08 = $2,000,000 =
Long Term Debt
Step 9
– Fixed Asset Turnover = Revenues/Fixed Assets. Therefore, 1.5 = $6,000,000/Fixed Assets. Fixed Assets = $6,000,000/1.5 = $4,000,000.
Step
10 – Total Assets = Current Assets + Fixed Assets = $600,000 + $4,000,000 =
$4,600,000.
Step
11 – Paid-In Capital (Common Stock plus Paid-In Excess) = Number of Shares x
Average Issue Price Per Share. Paid-In
Capital = 290,000 shares x $5/share = $1,450,000.
Step
12 – Since Assets = Liabilities + Equity and the only piece that is missing is
Retained Earnings, Retained Earnings = Total Assets – Current Liabilities –
Long Term Debt – Paid-In Capital = $4,600,000 - $400,000 - $2,000,000 -
$1,450,000 = $750,000.
Step
13 – Book Value/Share = (Paid-In Capital + Retained Earnings)/# of Shares =
($1,450,000 + $750,000)/290,000 = $7.59/share.
Step
14 – Market/Book Ratio = $18.37/$7.59 = 2.42
